SMEs get ‘raw deal’ on essential services and want more protection

Ombudsman Services | Oct 01, 2019

Nearly a third (30%) of SMEs think they get an unfair deal compared to residential customers when buying and using essential services like energy, telecoms and water, a survey has found.

That’s compared to just 26% who feel they get a fair deal.

The poll of more than 600 small and medium-sized businesses, commissioned by Ombudsman Services, also found that only 20% feel they have adequate protection from unfair practices by providers and intermediaries such as brokers and price comparison websites. Meanwhile, 37% said they lacked adequate protection.

Telecoms services were found to be the biggest source of problems, with around one in five (17%) SMEs having experienced poor service or unfair treatment when finding and using broadband, mobile and landline packages.

The comparable figures for energy and water were 10% and 5% respectively.

Nearly half (41%) of survey respondents said their business would benefit from additional support when resolving disputes with providers.

The findings are included in a new report, SMEs: building trust in markets and ensuring that they get a fair deal - Ombudsman Services, which was due to be launched by Ombudsman Services at a Conservative Party conference fringe event in Manchester today (Tuesday 1 October).

Matthew Vickers, chief executive at Ombudsman Services, said: “Small and medium-sized businesses are the backbone of the UK economy, but often lack the protection they need and deserve when using essential services.

“For example, as an ombudsman in the energy and telecoms sectors we are only allowed to investigate complaints made by individual consumers and microbusinesses with fewer than 10 employees.

“Complaints from microbusinesses make up 10% of the complaints we handle, but we are approached by hundreds of businesses ever year that we can't help because of their size.

“That means huge numbers of SMEs can’t use our service and therefore don’t have access to free, independent redress if they have a dispute with their energy supplier or telecoms provider.

“Furthermore, we cannot demand action of intermediaries like brokers because these companies are unregulated and fall outside our remit.

“We feel that these gaps in protection should be addressed for the sake of the UK’s vitally important SMEs and the wider economy.

“Unresolved problems with broadband or energy can have a huge impact and put prosperity and livelihoods at risk. These services are as essential for businesses as they are for consumers, so protection and redress are hugely important.”

In its report, Ombudsman Services calls for a review of the type and size of business that is entitled to free redress in energy and telecoms.

This follows the recent decision by the Financial Conduct Authority (FCA) to extend access to the Financial Ombudsman Service – a separate organisation with no links to Ombudsman Services – to 210,000 more SMEs.

The changes, which took effect in April, mean SMEs with up to 49 employees and an annual turnover of up to £6.5m, or a balance sheet up to £5m, can now refer unresolved financial services complaints to an independent ombudsman.

Vickers added: “The FCA’s move was recognition of the fact that SMEs face many of the same issues as domestic consumers when it comes to unresolved complaints, as they often lack the financial and legal resources to take disputes to court.

“As we say in our report, at Ombudsman Services we want to share best practice and kickstart analysis from other regulators on what a similar change could mean in other sectors.”

Martin Boon from Deltapoll, which carried out the survey on behalf of Ombudsman Services, added:

“Small businesses have enough on their plate without needing the additional distraction of utility suppliers taking advantage through unfair pricing plans.

“Yet this is what many have to face – a problem compounded by a lack of support or redress available to them. With four in ten SMEs calling for additional support in dispute resolution, it’s obvious that this is an area of market disfunction that can and should be filled.”

Ombudsman Services’ report, SMEs: building trust in markets and ensuring that they get a fair deal, can be downloaded here.

Purple Line

Notes to editors

• Ombudsman Services is a not-for-profit organisation that operates ombudsman schemes in the energy and telecoms sectors. It also administers the Parking on Private Land Appeals (POPLA) service.

• The survey of 639 UK SME decision makers was conducted by Deltapoll on behalf of Ombudsman Services

• Fieldwork was carried out between 22 June 2019 and 7 July 2019

• For more information on this news release, please email Press@Ombudsman-Services.org